Read ’em and weep. USA “all in” with a busted flush.

Read ’em and weep. USA “all in” with a busted flush.


For anyone interested in doing a deep dive into the state of the financial budget crisis facing the United States, you cannot do better than Mary Meeker’s recently released report “USA Inc.” Published under the auspices of venture capitalist Kleiner Perkins, it is detailed and comprehensive, yet clear, understandable and served up in digestible bites. It is well worth the time and effort.

The forward signed by Paul Volcker, George Schultz, Michael Bloomberg, Richard Ravitch and John Doerr sets the tone:

“Our country is in deep financial trouble. Federal, state and local governments are deep in debt yet continue to spend beyond their means, seemingly unable to stop. Our current path is simply unsustainable. What to do?

A lot of people have offered suggestions and proposed solutions. Few follow the four key guideposts to success that we see for setting our country back on the right path:

  1. create a deep and widely held perception of the reality of the problem and the stakes involved;
  2. reassure citizens that there are practical solutions;
  3. develop support in key constituencies; and
  4. determine the right timing to deliver the solutions.

USA Inc. uses each of these guideposts, and more; it is full of ideas that can help us build a better future for our children and our country.”

Highly recommended. Every American should take the time to dig into this document. I skimmed it, was blown away and expect to return for deeper insights and as a reference for future posts.

At over 250 pages, with hundreds of graphs, it is impossible to do this work justice in a blog post. I am occasionally accused of expending a thousand words when a picture or a pithy paragraph would suffice. In an attempt to exercise a little pontification discipline, in this post I will simply deal out a 5 card poker hand pulled from the hundreds found in the Meeker presentation deck.

This busted hand should have been folded as soon as it was dealt. No one is buying the bluff now. Time to throw it in, cut the losses, and reshuffle the deck.

Henry Blodgett says this is the only chart you need to understand why we are screwed. We cannot keep spending $5 dollars for every $3 we bring in.

It’s the entitlements stupid. Spending is out of control and by 2025, entitlements plus net interest payments will absorb all of the USA’s revenue. Yes, you read that right. In less than 15 years all taxes will go to pay interest and entitlements. As Mike Shedlock says “If that is not a shocking state of affairs, what is?”

We have to grow, but we cannot just grow our way out of the problem this time, as that presumption requires wildly unrealistic growth assumptions.

Taxing the rich cannot solve the problem. Taxing everyone does not solve the problem.

Unfunded liabilities are a crushing burden. We’ve got to lighten the load.

Net net. Meeker’s solution, unsurprisingly, is all of the above. Spending must be slashed, unfunded entitlement liabilities must be reduced dramatically, and revenue must be raised. Yes, tax rates on the rich must go up, tax loopholes must close, and the tax base must also be broadened.

Make no mistake. There is something for everyone to dislike in her recommendations – right, left and center. I am no exception. Meeker actually advocates increases in Infrastructure, Education and Defense spending while slashing entitlements. I am more of an equal opportunity hatchet man, and think nothing should be spared.

No matter. Deal me in.

Cut the BS and shuffle.


Cross-posted from Divided We Stand United We Fall

  • Aaron

    Interesting read. I will hafta go through this in its entirety. For now, to make sure I’m reading the graphs you posted correctly. The Revenues vs Expenses graph, things like subsidies we give out are just a lack of income, rather than rolled into one of the expenses, correct?

  • mw

    Not sure. It probably depends on the specific subsidy details. I think many agricultural subsidies go out in the form of actual payments or checks, which means they are in the expenses pie. Industry specific subsidies in the form of tax credits would probably be reflected in a smaller income chart as you suggest.